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Why Nonbank Lenders Are Dominating Short-Term CRE Financing in 2025
Thursday, January 30, 2025
Why Nonbank Lenders Are Dominating Short-Term CRE Financing in 2025
The Rise of Nonbank Lenders in Short-Term CRE Financing
As 2025 kicks off, one thing is clear: nonbank lenders are surging in the commercial real estate (CRE) financing space. Less than a month into the year, short-term lending activity has already outpaced the entire first quarter of 2024. With major banks still grappling with loan write-offs, private lenders are stepping in to fill the financing gap, providing bridge loans and floating-rate debt options to investors seeking flexible capital solutions.
But what’s driving this boom, and more importantly, how can commercial real estate investors take advantage of it?
Why Nonbank Lenders Are Leading the Charge
Several factors have converged to accelerate the growth of short-term lending by nonbank lenders:
1. Banks Are Pulling Back Due to Regulatory Pressures
Traditional banks have tightened underwriting standards due to rising delinquencies and regulatory scrutiny. This retreat has opened the door for private lenders to step in with more flexible financing solutions.
2. Interest Rate Trends Favor Floating-Rate Debt
With borrowing rates tied to the Secured Overnight Financing Rate (SOFR) on the decline, investors are gravitating toward floating-rate loans. These loans allow property owners to reposition assets and lease up vacancies without locking into rigid long-term debt structures.
3. Increased Deal Flow in Commercial Real Estate
Fourth-quarter 2024 transaction volumes were up 43% year-over-year, and this momentum is expected to carry into 2025. The rise in nonbank lending has played a critical role in reviving deal activity, particularly in value-add and transitional asset strategies.
Real-World Example: LoanCore Capital’s CRE Bond Offering
One of the most prominent players in this space is LoanCore Capital, a joint venture backed by Singapore’s GIC and the Canada Pension Plan Investment Board. LoanCore recently announced a $1.15 billion commercial real estate collateralized loan obligation (CRE CLO), the fourth such offering in 2025 alone.
The largest loan in LoanCore’s portfolio—$94.36 million—is backed by the Royal Worthington and Uptown Worthington properties in Malvern, Pennsylvania, including a 253-unit multifamily complex and a grocery-anchored retail center. These types of loans enable investors to secure bridge financing for repositioning assets and increasing rental income.
How CRE Investors Can
Capitalize on This Trend
Given the rise of short-term property financing by nonbank lenders, commercial real estate investors should consider the following strategies:
1. Utilize Bridge Loans for Asset Repositioning
With nonbank lenders easing underwriting standards, investors have greater access to short-term capital for property upgrades, tenant repositioning, and lease stabilization. This is particularly relevant in sectors like multifamily and industrial, where demand remains strong.
2. Consider CRE CLOs for Portfolio Expansion
Investors looking for alternative investment vehicles may find CRE CLOs attractive. These instruments allow participation in diversified real estate loan portfolios with relatively high yields compared to traditional fixed-income assets.
3. Leverage Floating-Rate Loans Before Rates Rise Again
With interest rates stabilizing, now is an opportune time to secure floating-rate debt. These loans offer flexibility through prepayment options and extensions, making them ideal for properties in transition.
4. Monitor Nonbank Lenders’ Growth for Future Opportunities
Nonbank lenders like FS Credit Real Estate Income Trust, ACRE Capital, and Argentic are expected to increase their market presence in 2025. Keeping an eye on their lending activity can help investors anticipate new financing opportunities.
Final Thoughts
The surge in short-term property financing by nonbank lenders represents a significant shift in the CRE investment landscape. With banks remaining cautious and private lenders filling the gap, investors who understand and leverage these alternative financing sources stand to gain the most. Whether repositioning assets, expanding portfolios, or securing flexible debt, now is the time to capitalize on this evolving trend.
Are you prepared to take advantage of nonbank lending opportunities in 2025?
Hi, I Am Sanjeev
REAL ESTATE BROKER / ENTREPRENEUR
Sanjeev Advani is a seasoned real estate entrepreneur and financial strategist from Bakersfield, California. Having built and sold his Company Synergy Property Management, he specializes in innovative investment solutions and portfolio growth. With a rich background spanning real estate, financial planning, and community leadership, Sanjeev brings a blend of tenacity, expertise, and visionary thinking to every endeavor. Dedicated to excellence and driven by a passion for empowerment, he is committed to guiding clients and communities toward success and prosperity.
